On November 1,2016,Paige Turner Publishing received $50,400 in cash for subscriptions covering one year,recording the entry as a debit to Cash and a credit to Unearned Subscriptions.The correct adjusting entry at December 31,2016,is

Question

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The adjusting entry at the end of the year is necessary to recognize the revenue earned during the period from the unearned subscription revenue account. As the company received $50,400 for subscriptions covering one year, at the end of December only one month has passed. Therefore, the company has earned 1/12th of the revenue ($50,400 ÷ 12 months = $4,200) and the remaining $46,200 is still unearned.

To record this adjusting entry, we need to debit the unearned subscriptions account (which decreases it) and credit the subscriptions income account (which increases it) for the amount of revenue earned during the period. Therefore, the correct adjusting entry is:

Debit Unearned Subscriptions $4,200
Credit Subscriptions Income $4,200

On November 1,2016,Paige Turner Publishing Received $50,400 in Cash for Subscriptions